GovernmentType: Federal republic.Independence: First proclaimed September 16, 1810; republic established 1824.Constitution: February 5, 1917.Branches: Executive--president (chief of state and head of government). Legislative--bicameral. Judicial--Supreme Court, local and federal systems.Administrative subdivisions: 31 states and a federal district.Political parties: Institutional Revolutionary Party (PRI), National Action Party (PAN), Party of the Democratic Revolution (PRD), Green Ecological Party (PVEM), Labor Party (PT), and several small parties. Suffrage: Universal at 18.

PEOPLEMexico is the most populous Spanish-speaking country in the world and the second most-populous country in Latin America after Portuguese-speaking Brazil. About 70% of the people live in urban areas. Many Mexicans emigrate from rural areas that lack job opportunities--such as the underdeveloped southern states and the crowded central plateau--to the industrialized urban centers and the developing areas along the U.S.-Mexico border. According to some estimates, the population of the area around Mexico City is about 18 million, which would make it the largest concentration of population in the Western Hemisphere. Cities bordering on the United States--such as Tijuana and Ciudad Juarez--and cities in the interior--such as Guadalajara, Monterrey, and Puebla--have undergone sharp rises in population in recent years.

Although educational levels in Mexico have improved substantially in recent decades, the country still faces daunting problems. Education is one of the Government of Mexico's highest priorities. The education budget for 2000--$23 billion--represented a 6.8% increase over the previous year's figure and 23% more funding in real terms for education in 2000 than in 1994. Educational funding now represents 27% of the budget. Education in Mexico also is being decentralized from federal to state authority in order to improve accountability.

Education is mandatory from ages 6 through 18. In addition, the Mexican Congress voted in December of 2001 to make one year of preschool mandatory by 2004. The increase in school enrollments during the past two decades has been dramatic. By 1999, 94% of the population between the ages of 6 and 14 were enrolled in school. Primary, including preschool, enrollment totaled 17.2 million in 2000. Enrollment at the secondary public school level rose from 1.4 million in 1972 to 5.4 million in 2000. A rapid rise also occurred in higher education. Between 1959-2000 college enrollments rose from 62,000 to more than 2.0 million.

HISTORY Highly developed cultures, including those of the Olmecs, Mayas, Toltecs, and Aztecs existed long before the Spanish conquest. Hernando Cortes conquered Mexico during the period 1519-21 and founded a Spanish colony that lasted nearly 300 years. Independence from Spain was proclaimed by Father Miguel Hidalgo on September 16, 1810; this launched a war for independence. An 1821 treaty recognized Mexican independence from Spain and called for a constitutional monarchy. The planned monarchy failed; a republic was proclaimed in December 1822 and established in 1824.

Prominent figures in Mexico's war for independence were Father Jose Maria Morelos; Gen. Augustin de Iturbide, who defeated the Spaniards and ruled as Mexican emperor from 1822-23; and Gen. Antonio Lopez de Santa Ana, who went on to control Mexican politics from 1833 to 1855. Santa Ana was Mexico's leader during the conflict with Texas, which declared itself independent from Mexico in 1836, and during Mexico's war with the United States (1846-48). The presidential terms of Benito Juarez (1858-71) were interrupted by the Hapsburg monarchy's rule of Mexico (1864-67). Archduke Maximilian of Austria, whom Napoleon III of France established as Emperor of Mexico, was deposed by Juarez and executed in 1867. Gen. Porfirio Diaz was president during most of the period between 1877 and 1911.

Mexico's severe social and economic problems erupted in a revolution that lasted from 1910-20 and gave rise to the 1917 constitution. Prominent leaders in this period--some of whom were rivals for power--were Francisco I. Madero, Venustiano Carranza, Pancho Villa, Alvaro Obregon, Victoriano Huerta, and Emiliano Zapata. The Institutional Revolutionary Party (PRI), formed in 1929 under a different name, emerged as a coalition of interests after the chaos of the revolution as a vehicle for keeping political competition in peaceful channels. For 71 years, Mexico's national government had been controlled by the PRI, which had won every presidential race and most gubernatorial races until the July 2000 presidential election of Vicente Fox Quesada of the National Action Party (PAN).

GOVERNMENTThe 1917 constitution provides for a federal republic with powers separated into independent executive, legislative, and judicial branches. Historically, the executive is the dominant branch, with power vested in the president, who promulgates and executes the laws of the Congress. The Congress has played an increasingly important role since 1997 when opposition parties first made major gains. The president also legislates by executive decree in certain economic and financial fields, using powers delegated from the Congress. The president is elected by universal adult suffrage for a 6-year term and may not hold office a second time. There is no vice president; in the event of the removal or death of the president, a provisional president is elected by the Congress.

The Congress is composed of a Senate and a Chamber of Deputies. Consecutive re-election is prohibited. Senators are elected to 6-year terms, and deputies serve 3-year terms. The Senate's 128 seats are filled by a mixture of direct-election and proportional representation. In the lower chamber, 300 deputies are directly elected to represent single-member districts, and 200 are selected by a modified form of proportional representation from five electoral regions. The 200 proportional representation seats were created to help smaller parties gain access to the Chamber.

The judiciary is divided into federal and state court systems, with federal courts having jurisdiction over most civil cases and those involving major felonies. Under the constitution, trial and sentencing must be completed within 12 months of arrest for crimes that would carry at least a 2-year sentence. In practice, the judicial system often does not meet this requirement. Trial is by judge, not jury, in most criminal cases. Defendants have a right to counsel, and public defenders are available. Other rights include defense against self-incrimination, the right to confront one's accusers, and the right to a public trial. Supreme Court justices are appointed by the president and approved by the Senate.

Principal Government OfficialsPresident--Vicente FOX QuesadaForeign Secretary--Jorge CASTA�EDA GutmanAmbassador to the U.S.--Juan Jose BREMER MartinoAmbassador to the United Nations--Adolfo AGUILAR ZinserAmbassador to the OAS--Miguel RUIZ Caba�as

Mexico maintains an embassy in the United States at 1911 Pennsylvania Ave. NW, Washington, DC 20006 (tel. 202-728-1600). Consular offices are located at 2827 - 16th St. NW, 20009 (tel. 202-736-1012), and the trade office is co-located at the embassy (tel. 202-728-1686).

Besides its embassy, Mexico maintains 48 diplomatic offices in the U.S. Consulates general are located in Chicago, Dallas, Denver, El Paso, Houston, Los Angeles, Miami, New Orleans, New York, San Antonio, San Diego, and San Francisco; consulates are (partial listing) in Atlanta, Boston, Detroit, Philadelphia, Seattle, St. Louis, and Tucson.

POLITICAL CONDITIONSOn July 2, 2000, Vicente Fox Quesada of the opposition "Alliance for Change" coalition, headed by the National Action Party (PAN), was elected president, in what are considered to have been the freest and fairest elections in Mexico's history. Fox began his 6-year term on December 1, 2000. His victory ended the Institutional Revolutionary Party's (PRI) 71-year hold on the presidency.

The Mexican Congress is a plural institution that is playing an increasingly important role in Mexico's democratic transition. No single party holds an absolute majority in either house of Congress.

Recent ElectionsThe July 2, 2000, elections marked the first time since the 1910-17 Mexican Revolution that the opposition defeated the party in government. Vicente Fox won the election with 43% of the vote, followed by PRI candidate Francisco Labastida with 36%, and Cuauhtemoc Cardenas of the Democratic Revolution Party (PRD) with 17%. Despite some isolated incidents of irregularities and problems, there was no evidence of systematic attempts to manipulate the elections or their results, and critics concluded that the irregularities that occurred did not alter the outcome of the presidential vote. Civic organizations fielded more than 80,000 trained electoral observers; foreigners--many from the United States--were invited to witness the process, and numerous independent "quick count" operations and exit polls validated the official vote tabulation.

Numerous electoral reforms implemented since 1989 aided in the opening of the Mexican political system, and opposition parties have made historic gains in elections at all levels. Many of the current electoral concerns have shifted from outright fraud to campaign fairness issues. During 1995-96 the political parties negotiated constitutional amendments to address these issues. Implementing legislation included major points of consensus that had been worked out with the opposition parties. The thrust of the new laws has public financing predominate over private contributions to political parties, tightens procedures for auditing the political parties, and strengthens the authority and independence of electoral institutions. The court system also was given greatly expanded authority to hear civil rights cases on electoral matters brought by individuals or groups. In short, the extensive reform efforts have "leveled the playing field" for the parties.

Even before the new electoral law was passed, opposition parties had obtained an increasing voice in Mexico's political system. A substantial number of candidates from opposition parties had won election to the Chamber of Deputies and Senate. As a result of the 2000 elections, the Congress is more diverse than ever. In the Chamber, 209 seats belong to the PRI, 207 to the PAN, 52 to the PRD, 16 for the Green Party, and the remaining 16 are split among four smaller parties and two independents. In the 128-seat Senate, the upper house of Congress, the PRI still holds the most seats at 60, but the PAN holds 46, the PRD 15, the Greens 5, and two smaller parties each have one seat. Senators serve 6 years in office and Deputies 3 years; neither can be elected to consecutive terms.

Although the PRI no longer controls the Presidency, it remains a significant force in Mexican politics. In gubernatorial contests since the 2000 presidential election, the PRI retained only one state house of five it had held previously. However, in state congressional and mayoral contests since July 2000, the PRI has fared better than the PAN.

Other ReformsConstitutional and legal changes have been adopted in recent years to improve the performance and accountability of the Supreme Court and the Office of the Attorney General and the administration of federal courts. The Supreme Court, relieved of administrative duties for lower courts, was given responsibilities for judicial review of certain categories of law and legislation. A variety of laws also was passed in 1995-96 to help control organized crime.

ChiapasAn unresolved sociopolitical conflict exists in the southernmost state of Chiapas. In January 1994, insurgents in the state of Chiapas briefly took arms against the government, protesting alleged oppression and governmental indifference to poverty. After 12 days of fighting, a cease-fire was negotiated that remains in effect. Since 1994 sporadic clashes have continued to occur between armed civilian groups, usually over disputed land claims.

As a presidential candidate, Fox promised to renew dialogue with the EZLN and address unresolved problems in the state. Following his inauguration, he ordered many troops out of Chiapas, dismantled roadblocks, closed military bases, and submitted revised peace accords to Congress. In August 2001, the peace accords became law, after having been passed by Congress and ratified by more than half of the state legislatures.

Since August, numerous legal challenges to the accords have been filed, and the Fox Administration has on more than one occasion suggested that modifications may be necessary.

NATIONAL SECURITYMexico's armed forces number about 225,000. The army makes up about three-fourths of that total. The navy is a completely autonomous cabinet agency and as such there is no joint chief of staff position. Principal military roles include national defense, narcotics control, and civic action assignments such as roadbuilding, search and rescue, and disaster relief.

ECONOMY Mexico is highly dependent on exports to the U.S., which account for almost a quarter of the country's GDP. The result is that the Mexican economy is strongly linked to the U.S. business cycle. With the downturn in the U.S. economy in 2001, there was little or no growth in Mexico in 2001. Depending on the strength of the recovery in the U.S. in 2002, growth in Mexico in 2002 will probably be between 1%-1.5%.

Mexican trade policy is among the most open in the world, with Free Trade Agreements with the U.S., Canada, the EU, and many other countries. Since the 1994 devaluation Mexican governments have improved the country's macroeconomic fundamentals. Moody's (in March 2000) and Fitch IBCA (in January 2002) have issued investment-grade ratings for Mexico's sovereign debt. The upgrade from Fitch IBCA was based in part on the determination that Mexico has not been significantly affected by "contagion" from Argentina's debt crisis.

TradeMexico is one of the world's most trade dependent countries, and it is particularly dependent on trade with the U.S, which buys approximately 85% of its exports. Top U.S. exports to Mexico include motor vehicle parts, electronic equipment, and agricultural products. Top Mexican exports to the U.S. include petroleum, cars, and electronic equipment. There is considerable intra-company trade.

Mexico is an active and constructive participant in World Trade Organization (WTO) matters, including in the launching of the Doha trade round. The Mexican Government and many businesses support a Free Trade Area of the Americas.

Given the overall size of trade between Mexico and the United States, there are remarkably few trade disputes, involving relatively small dollar amounts. These disputes are generally settled in WTO or NAFTA panels or through negotiations between the two countries. The most significant areas of friction involve trucking, sugar, high fructose corn syrup, and a number of other agricultural products.

AgricultureMexico's agrarian reform program began in 1917, when the government began distribution of land to farmers. Extended further in the 1930s, delivery of land to peasants continued into the 1960s and 1970s at varying rates. This cooperative agrarian reform, which guaranteed small farmers a means of subsistence livelihood, also caused land fragmentation and lack of capital investment, since commonly held land could not be used as collateral. Regionally poor soils, several recent years of low rainfall, and rural population growth have made it difficult to raise the productivity and living standards of Mexico's subsistence farmers.

There have been programs that provide money to pay off loans and help banks with their debt burdens. While high credit costs are still a major problem impeding agricultural development, the burden of debt has been reduced. High interest rates for loans have compounded the difficulty for producers, and the 1994 peso crisis exacerbated the decline in productivity. Agriculture accounted for 5.8% of GDP in 1999.

In an effort to raise rural productivity and living standards, Article 27 of the Mexican Constitution was amended in 1992 to allow for the transfer of communal land to the farmers cultivating it. They then could rent or sell it, opening the way for larger farms and economies of scale. By early 1996, however, only six farmers' cooperatives had voted to dissolve themselves, perhaps because the government provides subsidies for communal land seeded by farmers. (The subsidy was 708 pesos per hectare in 1999-2000 and 829 pesos per hectare in 2000-01.) Since communal land use is formally reviewed only every 2 years, privatization of these communal lands may continue to be very slow.

In the past, the government encouraged production of basic crops such as corn and beans by maintaining support prices. In order to stimulate its agricultural sector, Mexico is restructuring its support price scheme. The government in 1996 crafted federal-to-state agreements targeted at each states' most urgent needs, with the goal of increasing the use of modern equipment and technology in order to increase per-acre productivity. In addition to this new initiative, the government is continuing PROCAMPO, the rural support program which provides the approximately 3.5 million farmers who produce basic commodities--about 64% of all farmers--with a fixed payment per hectare of cropland.

Manufacturing and Foreign InvestmentManufacturing accounts for about 22% of GDP and grew by 9.4% in 2000. Manufacturing probably fell or was stagnant in 2001 because exports to the U.S. probably fell. Construction grew by almost 7% in 2000 but was probably stagnant in 2001.

Foreign Direct Investment (FDI) presents a bright picture in the Mexican economy. In 2000, Mexico was the largest recipient of FDI ($22.5 billion) in Latin America. Net U.S. FDI in Mexico in 2000 was $3.2 billion, and the 2000 U.S. stock of FDI in Mexico was $34.5 billion (U.S. BEA numbers). U.S. FDI is concentrated in the manufacturing (mostly maquiladora or in-bond plants) and financial sectors. Final numbers for 2001 have not been published; the largest U.S. investment in 2001 was Citigroup's $12.2 billion acquisition of Banamex. This investment was the main reason Mexico received more FDI than Brazil in 2001.

Oil and GasIn 2000 Mexico was the world's fifth-largest oil producer, its 10th- largest oil exporter, and the fourth-largest supplier of oil to the United States. Oil and gas revenues are expected to provide about one-third of all Mexican Government revenues in 2002.

Mexico's state-owned oil company, Pemex, holds a constitutionally established monopoly for the exploration, production, transportation, and marketing of the nation's oil. Since 1995, private investment in natural gas transportation, distribution, and storage has been permitted, but Pemex remains in sole control of natural gas exploration and production.

Transportation and CommunicationsMexico's land transportation network is one of the most extensive in Latin America. More than 4,000 kilometers (2,400 mi.) of four-lane highway have been built through government concessions to private sector contractors since 1989, of which 3,500 kilometers (2,100 mi.) have been constructed since 1994. The 26,622 kilometers (16,268 mi.) of government-owned railroads in Mexico have been privatized through the sale of 50-year operating concessions.

Tampico and Veracruz, on the Gulf of Mexico, are Mexico's two primary seaports. Recognizing that the low productivity of Mexico's 108 ports poses a threat to trade development, the government has steadily been privatizing port operations to improve their efficiency. A number of international airlines serve Mexico, with direct or connecting flights from most major cities in the United States, Canada, Europe, Japan, and Latin America. Most Mexican regional capitals and resorts have direct air services to Mexico City or the United States. Airport privatization, based on Mexico's successful experience with seaports, is nearly complete.

Several large U.S. telecommunications firms are active in Mexico. AT&T is partnered with Alestra while Worldcom maintains a minority share of Avantel. SBC works closely in Mexico with its partner, Telmex. Shares of Telmex, Mexico's incumbent dominant carrier, also are traded on the New York Stock Exchange. Competition in the sector has been hampered by the inability of Mexico's telecommunications regulator to enforce dominant carrier regulations, with regulation largely provided through a series of private agreements among the three largest carriers. This has negative implications for U.S. investors in the sector, although there are no reported barriers to exports of U.S. telecommunications goods and services. The teledensity rate in Mexico (around 13%) is among the lowest in Latin America. Mexico's satellite service sector was opened to competition, including limited foreign direct investment, in 2001.

FOREIGN RELATIONSTraditionally, the Government of Mexico has sought to maintain its interests abroad and project its influence largely through moral persuasion. In particular, Mexico champions the principles of nonintervention and self-determination. In its efforts to revitalize its economy and open up to international competition, Mexico has sought closer relations with the U.S., western Europe, and the Pacific Basin. While the United States and Mexico are often in agreement on foreign policy issues, some differences remain--in particular, relations with Cuba. The U.S. and Mexico agree on the ultimate goal of establishing a democratic, free-market regime in Cuba but disagree on tactics to reach that goal. Fox has promised to more actively promote international human rights and democracy and increase Mexico's participation in international affairs.

Mexico actively participates in several international organizations. It currently holds a seat on the UN Security Council (2002-03). It is a supporter of the United Nations and Organization of American States systems and also pursues its interests through a number of ad hoc international bodies. Mexico has been selective in its membership in other international organizations. It declined, for example, to become a member of Organization of Petroleum Exporting Countries. Nevertheless, Mexico does seek to diversify its diplomatic and economic relations, as demonstrated by its accession to GATT in 1986; its joining APEC in 1993; becoming, in April 1994, the first Latin American member of the OECD; and a founding member of the World Trade Organization in 1996. Mexico attended the 1994 Summit of the Americas, held in Miami, and managed coordination of the agenda item on education for the 1998 Summit of the Americas in Santiago, Chile.

U.S.-MEXICAN RELATIONSU.S. relations with Mexico are as important and complex as with any country in the world. A stable, democratic, and economically prosperous Mexico is fundamental to U.S. interests. U.S. relations with Mexico have a direct impact on the lives and livelihoods of millions of Americans--whether the issue is trade and economic reform, drug control, migration, or the promotion of democracy. The U.S. and Mexico are partners in NAFTA, and enjoy a rapidly developing trade relationship.

The scope of U.S.-Mexican relations goes far beyond diplomatic and official contacts; it entails extensive commercial, cultural, and educational ties, as demonstrated by the annual figure of nearly 340 million legal crossings from Mexico to the United States in the fiscal year 1999. In addition, more than a half-million American citizens live in Mexico. More than 2,600 U.S. companies have operations there, and the U.S. accounts for 60% of all foreign direct investment in Mexico. Along the 2,000-mile shared border, state and local governments interact closely.

There is frequent contact at the highest levels, including telephone calls. President Bush's announced visit in March 2002 to Monterrey is the latest in a series of personal meetings that includes President Bush's April 2001 visit to Guanajuato and President Fox's state visit to the U.S. in September 2001.

Since 1981, the management of the broad array of U.S.-Mexico issues has been formalized in the U.S.-Mexico Binational Commission, composed of numerous U.S. cabinet members and their Mexican counterparts. The commission holds annual plenary meetings, and many subgroups meet during the course of the year to discuss trade and investment opportunities, financial cooperation, consular issues and migration, legal affairs and anti-narcotics cooperation, cultural relations, education, energy, border affairs, environment and natural resources, labor, agriculture, health, housing and urban development, transportation, fisheries, tourism, and science and technology. The commission met most recently in June 2001 in Washington.

A strong partnership with Mexico is critical to controlling the flow of illicit drugs into the United States. The U.S. has certified Mexico as fully cooperating in this effort based on the level of cooperation on counternarcotics and Mexico's own initiatives in fighting drug trafficking. The U.S. will continue working with Mexico to help ensure that Mexico's cooperation and anti-drug efforts grow even stronger. The U.S. and Mexico continue to cooperate on narcotics interdiction, demand reduction, and eradication.

Border and Environmental AffairsCooperation between the United States and Mexico along the 2,000-mile common border includes state and local problem-solving mechanisms; transportation planning; and institutions to address resource, environment, and health issues. In 1993, the Border Liaison Mechanism (BLM) was established; now 10 BLMs chaired by U.S. and Mexican consuls operate in "sister city" pairs. BLMs have proven to be effective means of dealing with a variety of local issues ranging from accidental violation of sovereignty by law enforcement officials and charges of mistreatment of foreign nationals to coordination of port security and cooperation in public health matters such as tuberculosis. The BLMs form an integral part of the "New Border Vision."

As the number of people and the volume of cargo crossing the U.S.-Mexico border grow, so, too, does the need for coordinated infrastructure development. The multi-agency U.S.-Mexico Binational Group on Bridges and Border Crossings meets twice yearly to improve the efficiency of existing crossings and coordinate planning for new ones. The 10 U.S. and Mexican Border States have become active participants in these meetings.

The United States and Mexico have a history of cooperation on environmental and natural resource issues, particularly in the border area, where there are serious environmental problems caused by rapid population growth, urbanization, and industrialization. Cooperative activities between the U.S. and Mexico take place under a number of agreements such as:

An 1889 convention establishing the International Boundary Commission, reconstituted by the Water Treaty of 1944 as the International Boundary and Water Commission, United States and Mexico (IBWC). The IBWC has settled many difficult U.S.-Mexico boundary and water problems, including the regularization of the Rio Grande near El Paso through the 1967 Chamizal settlement. The IBWC divides the use of international waters, builds and operates water conservation and flood control projects, and constructs and maintains boundary markers on the land boundary and on international bridges. In recent years, the IBWC has worked to resolve longstanding border sanitation problems, to monitor the quantity and quality of border waters, and to address water delivery and sedimentation problems of the Colorado River. Current issues include Mexico's water debt to the U.S. on the Rio Grande, ecology of the Colorado River Delta, shared wastewater treatment facilities in San Diego/Tijuana, and the impact on Mexican groundwater sources which may be caused by the lining of the All-American Canal.

A series of agreements on border health (since 1942), wildlife and migratory birds (since 1936), national parks, forests, marine and atmospheric resources. In July of 2000, the U.S. and Mexico signed an agreement to establish a binational Border Health Commission. The Border Health Commission held its inaugural meeting in November 2000.

The 1983 La Paz Agreement to protect and improve the border environment and Border XXI, a binational, interagency planning program, begun in 1996, to address environmental, natural resource, and environmental health concerns in the border area. The U.S. and Mexico have initiated discussion to develop a new border environmental program that will build on the progress of Border XXI while enhancing decentralization and stakeholders' involvement.

The 1993 North American Agreement on Environmental Cooperation (NAAEC), creating the North American Commission on Environmental Cooperation under NAFTA by the U.S., Mexico, and Canada, to improve enforcement of environmental laws and to address common environmental concerns.

A November 1993 agreement between the U.S. and Mexico, also related to NAFTA, establishing the Border Environment Cooperation Commission (BECC) which works with local communities to develop and certify environmental infrastructure projects such as wastewater treatment plants, drinking water systems, and solid waste disposal facilities. The sister organization, the North American Development Bank (NADBank), uses capital and grant funds contributed by partner governments to help finance border environmental infrastructure projects certified by the BECC. BECC has certified more than 40 environment infrastructure projects, 35 of which are now built or are under construction. In November 2000, the BECC's role was expanded to include hazardous waste and water conservation projects.

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